OM AND TQM
First Semester, Midterm
Operations Management and Total Quality Management
Operation Management - Focuses on internal processes within an organization, including production, quality control, inventory management, and process improvement. It aims for efficiency within the organization.
Supply Chain Management - broad network of organizations involved in creation and delivery of a product or service. It includes managing relationships with suppliers, manufacturers, distributors, and customers.
Interconnecting points of OM and SCM
Process Integration
Workflow coordination
Inventory management
Communication and Information Flow
Real-time data
Feedback Loop
Resource Management
Demand and supply matching
Cost efficiency
Strategic Alignment
Customer Satisfaction
Competitive advantage
Value chain management - sequence of activities to deliver a product or service, with each step adding value to the product or service, enhancing its attractiveness to customers. The primary goal is to maximize value with each step, while minimizing the cost, leading to greater value.
Value chain management focuses on optimizing internal processes to maximize value, while Supply Chain Management refers to the broad network of partners and processes involving the movement of products from suppliers to customers, emphasizing efficiency.
What do operations managers do?
Forecasting
Supply chain management
Facility Layout and Design
Technology Selection
Quality Management
Purchasing
Resource and Capacity Management
Process Design
Job Design
Service Encounter Design
Scheduling and Sustainability
What makes a company successful?
According to William Cooper Procter, “The first job we have is to turn out quality merchandise that customers will buy and keep on buying. If we produce it effectively and economically, we will earn a profit, in which you will share.”
Three issues that are at the core of operations management is efficiency, cost, and quality
Goods
Physical products
Durable (Tables)
Non Durable (Consumables, toothpaste)
Services
Activities that do not directly produce a physical product.
Goods are tangible, while services are intangible.
The demand for services is harder to predict than the demand for goods.
Service cannot be stored as physical inventory
Service management skills are paramount to a successful service encounter
Service facilities typically need to be in close proximity to customers
Patents do not protect services
The concept of Value - perception of benefits associated with a goods or service in relation to how buyers are willing to pay for them.
Value Formula
Perceived Benefits .
Price (Cost) to customer
Customer Benefit Package (CBP) - set of tangible (goods) and intangible (service) features that a customer recognizes, pays for, and uses, or experiences.
Primary good - “core” product. (Vehicle)
Peripheral good - not essential to the core product, but enhances it. (Free car wash, free replacement parts, free repair)
Variant good - what makes the CBP unique from other CBPs
Value Chains - network of facilities and processes that describe the flow of materials, finished goods, information, and financial transactions.
Work Process - sequence of activities intended to create a certain result.
Ex. Car wash process
Check the car in
Perform the wash
Inspect the results
Notify the customer that the work is finished
Deliver the car
Collect payment
Input - Output
Suppliers - Inputs (people, information, physical goods) - Value Creation Processes - Goods & Services, Output & Outcomes - Postsale Services
Pre and Post-Service View of the Value Chain
Gaining a customer - Preproduction
Good and Service Design
Supplier Services
Purchasing Services
Contract Negotiations
Financing
Value Creation - Production process
Create the Good or Service
Process type and capability
Price/Cost, quality, time, safety, flexibility, innovation, and learning market and financial performance.
Keeping the Customer - Postproduction
Servicing Loans/Financing
Installation, maintenance
Transportation Services
Warranty/Claims
Supply Chain Structure
Suppliers - Manufacturing Plant - Regional warehouses - Retail store - Customers
Manufacturing Plant orders from suppliers | Regional Warehouse orders from Manufacturing plant | Retail stores orders from Regional Warehouse | Customers order from retail stores.
OM: History of Change
Focus on Efficiency - Business focuses on efficiency
Quality Revolution - focus on quality
Customization and Design - focus on product design
Time-Based Competition - first to deliver products
Service Revolution - service became primary drivers for growth
Sustainability - environmental, social, and economic; ability to continue operations in a sustainable manner
Data and Analytics - emphasizes research of data and analysis.
Challenges
Customers - being first to market is vital
Technology - OM needs to continue to leverage tech advances
Workforce - become flexible with how and where their workforces operate
Globalization - managing operations in different countries and culture can be problematic
Sustainability - global sourcing managers must qualify on at least four performance areas
Optimizing Supply Chain - determining where to acquire the best raw materials, components, and finished goods.